A guide to filling out your W-4 form

Tax forms can be hard to fill out, especially the first few times. Each form comes with its own set of instructions, but sometimes you still end up being confused. Don't worry – we feel your pain. We'll take you through the process of how to complete a W-4 form, also known as an employee's withholding allowance certificate.

W-4 Forms: The Basics

W-4s aren't as scary as they may look. Employees complete this two-page form so that their employers know how much federal income tax needs to be withheld from their paychecks. You've probably come across a W-4 form if you've recently gotten a new job or your financial situation has shifted due to something like a divorce or the birth of a child.

Let's back up just a bit. What is withholding? It involves having a portion of your earnings taken and sent to the government. Even if you're not working, you may have taxes withheld from other sources of income such as pensions, commissions and awards.

Although you're required to submit a W-4 when you're first hired, you can turn in a new form as often as once a year or whenever you need to update your filing status. Depending on those changes, you may have more or less tax pulled from your wages.

You can expect the information on your W-4 to go into effect fairly quickly. Your boss must update your information by the beginning of the pay period that ends 30 or more days after you hand in the form.

What happens if you accidentally forget to give your employer your W-4? Prepare to have the IRS treat your income like it's taking taxes from a single person with zero withholding allowances. That's the highest possible withholding rate, and it could be a real problem if you need more take-home pay to buy a new house or cover some other expense.

How Does the W-4 Form Differ From the W-2?

Yes, both of these forms start with the letter 'w,' but that's where the similarities end.

Unlike a W-4, a W-2 form is what your employer fills out for all of her employees. It indicates the total amount of money that has been withheld and put toward Social Security, Medicare, state, local and federal income taxes. A W-2 shows your annual earnings from wages and tips as well.

Adding Up Your Allowances, Deductions and Adjustments

Before you can fill out a W-4 form, you'll need to complete the personal allowances worksheet. To do that, figure out how many allowances you're going to claim. As the number of your allowances increases, the amount of money withheld from your paycheck decreases.

You'll need to enter numbers in lines A – G based on your unique situation, so it's a good idea to pay close attention to the instructions. This part of the form may take more time to finish if you have children and/or you're married. But if you're single and you have one job, you'll enter a "1" for line A and a "1" for line B.

Write the sum of your allowances on line H. That will be "2" for the unmarried person with only one employer. If you have any deductions or income adjustments to make, you can then move on to the second page. It's possible to get adjustments for paying alimony, moving and having a health savings account.

On the deductions and adjustments worksheet, you'll need to do some math as you estimate your adjustments and add up your deductions that come from giving to charity or getting a mortgage. If you get stuck, the IRS has a withholding calculator that'll itemize your deductions, tell you how many allowances you can claim and determine the amount of income adjustments you're allowed to have.

How to Fill out the Two-Earners/Multiple Jobs Worksheet

Anyone who's married to a spouse who works or who works a second job herself/himself will next need to take a look at the two-earners/multiple jobs worksheet. The number from line H on the personal allowances worksheet goes on line 1 of this worksheet, unless you have deductions or allowances.

The two tables at the bottom of the page will help you complete lines 2 through 9. These tables basically show you which numbers to enter depending on which spouse makes the most and least amount of money and which of your jobs brings in the most and least amount of income.

How to Fill out Your W-4 Form

The worksheets you've done so far weren't a complete waste of time because you'll need them to fill out your W-4 form. Once it's done, the worksheets are yours to keep.

Lines 1 through 4 of your W-4 are for your personal information: your name, address, social security number and filing status. Line 5 is for either the number from line H on your personal allowances sheet or the number from line 10 on your deductions and adjustments worksheet. Any extra money you want withheld from your check or the total from the two earners/multiple jobs worksheet goes on line 6.

In order to avoid withholding altogether, you'll have to fall into both of the following categories: you have no tax liability this year and you had no tax liability in the previous tax season, so all of the federal income tax you paid was given back to you. Generally, you can say you have no tax liability when you're not required to file an income tax return or you owe zero taxes. You may also be able to claim an exemption if your earned income for the year is extremely low ($1,050 or less).

If those conditions apply to you, you can write "exempt" in line 7. Keep in mind that the exemption only eliminates your federal income taxes, not your Medicare or Social Security. After you've signed the form, you're good to go!

The Takeaway

Failing to turn in a W-4 is a big no-no. But you could run into other issues if you don't include the right numbers on the form. If you don't pay enough, you might owe additional taxes later on. If you make the mistake of paying the IRS too much, you'll get that money back in the form of a tax refund once you've filed your taxes.